Now the sole manager, Dan Whitestone offers a growth-oriented portfolio of UK small and mid caps through BlackRock Throgmorton Trust.
The trust is referred to as an ‘extension fund’ by BlackRock, using both long and short positions to deliver consistent capital growth and attractive total returns. More specifically, this means the trust can increase its overall gross exposure to the market, varying its net exposure over time. Dan aims to manage the portfolio so that the net exposure amounts to between 70% of NAV and 115% of NAV. The shorts are typically a smaller size than long positions, between 0.5% and 1% of NAV.
Fundamental analysis is at the heart of the strategy - Dan looks for high quality, differentiated companies which sit in structurally sound industries. Making full use of the investment trust structure, THRG is typically geared through the use of CFDs. As opposed to bank borrowing which incurs arrangement fees etc, CFDs allow the manager ultimate flexibility to react opportunistically to share price movements. Currently, Throgmorton’s gross gearing stands at 23%, although the net exposure (deducting shorts) is 90%.
The trust has an exceptional long-term track record of outperformance relative to the benchmark and peer group alike. Over the past five years (to the end of March), the trust has delivered NAV returns of 67.6%, seven times greater than the benchmark Numis Smaller Companies plus AIM ex inv com, (9.8%) and close to double the FTSE All Share (34.9%). The trust has also significantly outperformed the previous benchmark, the Numis SC Ex Invt Com, outperforming by c.38% over the past five years.
Given the company invests in one of the most out of favour sectors across the globe, the trust had a relatively strong year in 2018. The fact the smaller companies portfolio outperformed the benchmark by over 6%, and only marginally underperformed the FTSE All share (-9.5%) over this period, is surely a testament to the manager and his quality driven investment style, and ability to add alpha through shorts.
The trust’s discount has narrowed significantly since the referendum in 2016 – when it reached a 22% discount at one point - and we have continued to see it narrowing over 2018 and 2019 ytd. Currently the discount sits at close to 5.5%.